First-time purchaser mortgage market ‘on hearth’ as three banks slash charges for these with smaller deposits

Santander, NatWest and Barclays have all announced they are cutting mortgage rates for first-time buyers.

From tomorrow, Santander will lower its first-time buyer rates by up to 0.32 percentage points across two, three and five-year deals, slashing costs for those buying with deposits of between 5 and 15 per cent. 

It follows on from Nationwide Building Society, which last week cut its home loan prices by up to 0.16 percentage points.

Santander’s first-time buyer fixed rates will start from 3.92 per cent for those with a 15 per cent deposit.

On a £200,000 mortgage being repaid over 30 years that would equate to paying £946 a month.

NatWest is also lowering its zero product fee two-year fixed rate deals for first-time buyers by up to 0.12 percentage points.

Aspiring homeowners with a 5 per cent deposit will be able to secure rates between 4.81 per cent and 4.69 per cent with the high street bank.

Barclays is also reducing its two-year fixed rates aimed at first-time buyers with a 5 per cent deposit from 4.92 per cent to 4.6 per cent.

On a £200,000 mortgage being repaid over a 30 year term that would equate to paying £1,025 a month. 

Santander’s changes also include a five-year fixed rate of 4.72 per cent for those buying with a 5 per cent deposit. 

It is also offering a 4.17 per cent five-year fixed rate for those buying with a 15 per cent deposit, with a £999 fee.

As for new build buyers, Santander is reducing rates across its range of new build first-time buyer deals by up to 0.32 percentage points.

The newly reduced rates from all three lenders are available to customers applying via brokers or directly with each bank.

Samuel Mather-Holgate, managing director at Swindon-based Mather and Murray Financial said the rate cuts could come even faster if inflation plays ball on Wednesday.

‘Major lenders seem to be targeting higher loan-to-values, with Santander, Nationwide and now NatWest making their rates more competitive at 95 per cent loan-to-value.

‘This is fantastic news for first-time buyers and, if inflation comes down on Wednesday as expected, rates could continue on their downward trajectory.’

Louis Mason, content and communications director at London-based Oportfolio Mortgages added: ‘First-time buyers are basically the golden ticket of the mortgage world right now.’

Better choice and lower rates for first-time buyers 

First-time buyers with smaller deposits have continued to see new deals appear in recent months.

The number of mortgage options aimed at those buying with a 10 per cent deposit is at a record-high, according to the latest data from Moneyfacts.

Meanwhile, those with a 5 per cent deposit have the highest number of options since March 2008, albeit the electronic monitoring of mortgages by Moneyfacts only started in July 2007. 

And earlier this month, Santander came out with a 2 per cent deposit mortgage for first-time buyers, as long as it is not below £10,000.

It means an eligible buyer could purchase a £500,000 home with just a £10,000 deposit. 

Santander’s ‘My First Mortgage’ product is a five-year fixed rate deal, with a rate of 5.19 per cent, zero product fee and £250 cashback.

Someone buying a £500,000 property with a £490,000 mortgage could expect to pay £2,689 a month if repaying the whole loan over a 30 year period.

Mortgage brokers said the latest wave of cuts reflects an ‘increasingly aggressive’ strategy as lenders seek to ignite the market, with one claiming the first-time buyer mortgage market is officially on fire. 

Richard Davidson, mortgage advisor at onlinemortgageadvisor.co.uk, described Santander’s recent rate cuts as particularly ‘aggressive’.

He said: ‘Santander’s larger reductions for first-time buyers align with their increasingly aggressive strategy in this space, as we’ve seen with their recent move into 98 per cent loan-to-value mortgages.

‘They’re clearly looking to make a big mark this year and potentially undercut some of the other big lenders.

‘The modest increases elsewhere in their portfolio are more an indication of where Santander wants to focus their firepower this year, rather than any signal on the direction of rates more generally.’

Omer Mehmet, managing director at Welling-based Trinity Finance, was also upbeat about recent rate cuts.

‘The first-time buyer mortgage market is officially on fire,’ said Mehmet. ‘Lenders are actively targeting this demographic and the result is a huge win for those seeking to get onto the ladder. 

‘Rates coming down further supports affordability and can make a huge difference for aspiring borrowers.’